ch 07 process strategy chapter 7

Adeng Pustikaningsih, M.Si.
Dosen Jurusan Pendidikan Akuntansi
Fakultas Ekonomi
Universitas Negeri Yogyakarta

CP: 08 222 180 1695
Email : adengpustikaningsih@uny.ac.id

Operations
Management
Process Strategy
Chapter 7
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Outline

 GLOBAL COMPANY PROFILE: DELL
COMPUTER CO.
 FOUR PROCESS STRATEGIES


Process Focus



Repetitive Focus



Product Focus



Mass Customization Focus



Comparison of Process Choices

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Outline - Continued
 PROCESS ANALYSIS AND DESIGN


Flow Diagrams



Time-Function Mapping



Process Charts



Service Blueprinting

 SERVICE PROCESS DESIGN


Customer Interaction and Process Design



More Opportunities to Improve Service Processes

 SELECTION OF EQUIPMENT AND
TECHNOLOGY

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Outline - Continued
 PRODUCTION TECHNOLOGY


Machine Technology



Process Control



Vision Systems



Automated Storage and Retrieval System



Automated Guided Vehicle (AGV)



Flexible Manufacturing Systems (FMS)



Computer-Integrated Manufacturing (CIM)

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Outline - Continued
 TECHNOLOGY IN SERVICES
 ENVIRONMENTALLY FRIENDLY PROCESSES
 PROCESS REENGINEERING

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Learning Objectives

When you complete this chapter, you should be
able to :
Identify or Define:







Process focus
Repetitive focus
Product focus
Process reengineering
Service process issues
Environmental issues

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Learning Objectives - Continued
When you complete this chapter, you should be
able to:
Describe or Explain:





Process analysis
Service design
Green manufacturing
Production technology

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Dell Computer Company
“How can we make the process of buying a
computer better?”
 Sell custom-build PCs directly to consumer
 Integrate the Web into every aspect of its business
 Operate with six days inventory
 Build computers rapidly, at low cost, and only when
ordered
 Focus research on software designed to make
installation and configuration of its PCs fast and simple

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Fit of Process, Volume, and Variety
Repetitive Process
(Modular)

Low-Volume
(Intermittent)

High Variety
One or few units per
run, high variety
(allows customization)
Changes in modules
Modest runs, standardized
modules

Changes in attributes
(such as grade, quality,
size, thickness, etc.)
Long runs only

Process focus
projects, job
shops,(machine, print,
carpentry)
Standard Register

Poor strategy

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Mass
Customization
(difficult to achieve,
but huge rewards)
Dell Computer Co.

Repetitive
(autos, motorcycles)
Harley Davidson

7-10

High-Volume
(Continuous)

Product focus
(commercial baked
goods, steel, glass)
Nucor Steel

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Production Process Flow Diagram
Customer
Customer sales
representative
(take order)

Purchasing
(order inks, paper,
other supplies)
Vendors

Accounting

Prepress Department
(Prepare printing plates
& negatives)

Receiving
Warehousing
(ink, paper, etc.)

Printing Department
Gluing, binding,
stapling, labeling

Collating
Department

Polywrap
Department

Information flow
Material flow

Shipping
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Process Strategies
 Involve determining how to produce a product or
provide a service
 Objective



Meet or exceed customer requirements
Meet cost & managerial goals

 Has long-run effects



Product & volume flexibility
Costs & quality

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Types of Process Strategies
 Process strategies that follow a continuum
 Within a given facility, several strategies may be used
 These strategies are often classified as:
Process-Focused

RepetitiveFocused

Product-Focused

Continuum
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Process-Focused Strategy
 Facilities are organized by process
 Similar processes are together


Example: All drill presses are together

 Low volume, high variety products
 ‘Jumbled’ flow
Product A
Operation
 Other names
1



Intermittent process
 Job shop

2

3

Product B
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Process Focus

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Process-Focused Strategy Examples

Bank
Hospital

© 1995 Corel Corp.

© 1995
Corel
Corp.

Machine
Shop
© 1995 Corel Corp.

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Process Focused Strategy Pros & Cons
 Advantages




Greater product flexibility
More general purpose equipment
Lower initial capital investment

 Disadvantages





High variable costs
More highly trained personnel
More difficult production planning & control
Low equipment utilization (5% to 25%)

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Repetitive Focused Strategy
 Facilities often organized by assembly lines
 Characterized by modules


Parts & assemblies made previously

 Modules combined for many output options
 Other names


Assembly line
 Production line

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Repetitive Focus

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Repetitive Focused Strategy Considerations
 More structured than process-focused, less
structured than product focused
 Enables quasi-customization
 Using modules, it enjoys economic advantage of
continuous process, and custom advantage of
low-volume, high-variety model

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Repetitive-Focused Strategy Examples
Fast
Food

Clothes
Dryer
McDonald’s
over 95 billion served

Truck
© 1995 Corel Corp.

© 1984-1994 T/Maker Co.

© 1995 Corel Corp.

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Flow Diagram Showing the Production
Process for Harley Davidson, York, PA.

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Product-Focused Strategy
 Facilities are organized by product
 High volume, low variety products
 Where found


Discrete unit manufacturing
 Continuous process manufacturing

Products A & B

 Other names


Line flow production
 Continuous production
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2

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Product Focus

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Product-Focused Strategy
Pros & Cons
 Advantages





Lower variable cost per unit
Lower but more specialized labor skills
Easier production planning and control
Higher equipment utilization (70% to 90%)

 Disadvantages


Lower product flexibility
 More specialized equipment
 Usually higher capital investment

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Product-Focused Examples
Soft Drinks
(Continuous,
then Discrete)
Light Bulbs
(Discrete)
© 1995 Corel
Corp.

Mass
Flu Shots
(Discrete)

© 1984-1994 T/Maker Co.

Paper (Continuous)

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© 1995 Corel Corp.

© 1995 Corel Corp.

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Flow Diagram Showing the
Steelmaking Process at NUCOR

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A Comparison (1)
Process Focus
(Low volume, High
variety)

Repetitive Focus
(Modular)

Product focus
(High-volume,
low-variety)

1. Small quantity,
large variety of
products

Long runs,
standardized
product, from
modules

2. General purpose
equipment

Special
Special purpose
equipment aids in equipment
use of assembly
line

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Large quantity,
small variety of
products

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Mass
Customization
(High-volume,
high-variety
Large quantity,
large variety of
products
Rapid
changeover on
flexible equipment

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A Comparison (2)
Process Focus
3 Broadly skilled
operators

Repetitive Focus

Product focus

Modestly trained
employees

Operators less
broadly skilled

Mass
Customization
Flexible operators
trained for
customization

4 Many instructions Reduced training Few work
because of change and number of job orders and job
in jobs
instructions
instructions

Custom orders
require many
instructions

5 Raw material
high relative to
product value

Raw material low
relative to product
value

JIT techniques
used

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Raw material
low relative to
product value

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A Comparison (3)
Process Focus

Repetitive Focus

Product focus

Mass
Customization

6 WIP high relative JIT techniques
to output
used

WIP low relative to WIP driven
output
down by JIT,
kanban, lean
production

7 Units move
slowly thru plant

Movement
measured in hours
& days

Units move swiftly Goods move
thru facility
swiftly thru
facility

8 Finished goods
made to order, not
stored

Finished goods
made to frequent
forecasts

Finished goods
made to forecast,
then stored

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Finished goods
made to order

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A Comparison (4)
Process Focus

Repetitive Focus

Product focus

9 Scheduling
complex and
concerned with
trade-off between
inventory, capacity,
and customer
service

Scheduling based
on building models
from a variety of
forecasts

Scheduling
relatively simple,
concerns
establishing
sufficient rate of
output to meet
forecasts

Scheduling
sophisticated to
accommodate
customization

Fixed costs high,
variable costs low

Fixed costs high;
variable costs
must be low

10 Fixed costs low, Fixed costs
variable costs high dependent on
flexibility of
facilities
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Mass
Customization

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A Comparison (5)
Process Focus

11 Costing, done
by job, is
estimated prior to
doing job but only
known after doing
job

Repetitive Focus

Costs usually
known based on
experience

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Product focus

Because of high
fixed costs, cost
dependent on
utilization of
capacity

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Mass
Customization

High fixed costs
and dynamic
variable costs

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Process Continuum
Process Focused
(intermittent process)

Repetitive Focus
(assembly line)

Product Focused
(continuous process)

Continuum
High variety, low volume
Low utilization (5% - 25%)
General-purpose equipment

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Modular
Flexible equipment

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Low variety, high volume
High utilization (70% - 90%)
Specialized equipment

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Volume and Variety of Products
Volume and
Variety of
Products

Low Volume High
Variety Process
(Intermittent)

One or very few
units per lot
Very small runs, high
variety
Modest runs, modest
variety
Long runs, modest
variations
Very long runs,
changes in
attributes
Equipment utilization

Projects

Repetitive
Process
(Modular)

Mass
Customization

Job Shops

Poor Strategy
(High variable
costs)

5%-25%

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Disconnected
Repetitive
Connected
Repetitive
Continuous
20%-75%

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High Volume
Low Variety
Process
(Continuous)

70%-80%

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Mass Customization
 Using technology and imagination to rapidly
mass-produce products that cater to sundry
unique customer desires.
 Under mass customization the three process
models become so flexible that distinctions
between them blur, making variety and volume
issues less significant.

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Mass Customization - More
Choices Than even
Number of Choices
Early 21st
Early
Century
1970s

Item
Vehicle models
Vehicle styles
Bicycle types
Software titles
Web sites
Movie releases
New book titles
Houston TV channels
Breakfast cereals
Item SKUs in supermarkets
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140
18
8
0
0
267
40,530
5
160
14,000
7-36

260
1,212
19
300,000
30,727,296
458
77,446
185
340
150,000

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Process Strategies
Repetitive Focus
Modular design
Flexible equipment
Modular techniques
Mass Customization
Effective scheduling
techniques

Rapid throughput
techniques

Process-focused
High variety, low volume
Low utilization (5% - 20%)
General purpose equipment
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Product-focused
Low variety, high volume
High utilization (70% - 80%)
Specialized equipment
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Questions for Process Analysis
and Design
 Is the process designed to achieve competitive
advantage in terms of differentiation, response, or
low cost?
 Does the process eliminate steps that do not add
value?
 Does the process maximize customer value as
perceived by the customer?
 Will the process win orders?
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Crossover Charts
Fixed cost
$

Variable cost

$

Process A

$

Process B

Process C

$
400,000
300,000
200,000
V1(2,857) V2 (6,666)
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Fixed cost –
Process A

Volume
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Fixed cost –
Process B

Fixed cost –
Process C

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Tools for Process Design
 Flow Diagrams
 Process Charts
 Time-Function/Process Mapping
 Work Flow Analysis

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Production Process Flow Diagram
Customer

Customer sales
representative
take order

Purchasing
(order inks, paper,
other supplies)
Vendors
Accounting

Prepress Department
(Prepare printing plates
and negatives)

Receiving
Warehousing
(ink, paper, etc.)

Printing Department
Gluing, binding,
stapling, labeling

Collating
Department

Polywrap
Department

Information flow
Material flow

Shipping
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Time Function Map
(Baseline)

Print

Warehouse

WIP

Plant B

Wait

Wait

Transport

Extrude

Wait
Product

WIP

Plant A

Product

Wait
Order

Production
control

Product

Process
Order

WIP

Sales

Receive
product

WIP

Order
Product

Order

Customer

Move
12 days

13 days

1 day

4 days

1 day

Move
10 days

1 day

9 days

1 day

52 days
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Time Function Map
(Target)
Sales

Process
Order
Wait
Order

Production
control

Receive
product

WIP

Print

Extrude

Warehouse

Wait

Transport

Product

Plant

Product

Order
Product

Order

Customer

Move

1 day

1 day

1 day

2 days

1 day

6 days
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Process Chart Example
SUBJECT: Request tool purchase
Dist (ft)

Time (min)

Symbol

Description

 D  Write order
 D On desk

  D  To buyer

75

 D  Examine
 = Operation;  = Transport;  = Inspect;
D = Delay;  = Storage
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Process Chart – Hamburger Assembly
Dist.
(Ft)

Time
(Mins)
-

1.5

.05
2.50
.05

1.0

.05
.15

.5

.10
.20

.5

.05

Chart
Symbols












Process Description
Meat Patty in Storage
Transfer to Broiler
Broiler
Visual Inspection
Transfer to Rack
Temporary Storage
Obtain Buns, Lettuce, etc.
Assemble Order

Place in Finish Rack

2 4 1 - 2 TOTALS
Value-added time = Operation time/Total time = (2.50+.20)/3.15=85.7%
3.5

3.15

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Service Blueprint for Service at
Ten Minute Lube, Inc.

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Work Flow Analysis - Four Phases
 Request from a customer or an offer to provide services
by a performer
 Negotiation, allowing the customer and the performer to
agree on how the work should be done and what will
constitute customer satisfaction
 Performance of the assignment and completion
 Acceptance, closing the transaction provided the customer
expresses satisfaction and agrees that the conditions
were met.

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Attaining Lean Production
 Focus on inventory reduction
 Build systems that help employees
 Reduce space requirements
 Develop close relationships with suppliers
 Educate suppliers
 Eliminate all but value-added activities
 Develop the workforce
 Make jobs more challenging
 Set sights on perfection!

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Customer Interaction and Process
Strategy
Low

High

Mass Service
Personal
banking

Commercial
Banking

Full-service
stockbroker

General purpose
law firms

High

Boutiques

Retailing

Service Factory

Law clinics

Limited service
stockbroker

For-profit
hospitals

Fast food
restaurants

Warehouse and
catalog stores

Service Shop

Fine dining
restaurants

Hospitals

Low

Degree of Labor Intensity

Professional Service

Airlines
No frills
airlines

Degree of Interaction and Customization
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Techniques for Improving Service
Productivity
Strategy
 Separation
 Self-service

Technique
 Structure service so customers
must go where service is
offered
 Self-service so customers
examine, compare and
evaluate at their own pace

 Postponement

 Customizing at delivery

 Focus

 Restricting the offerings

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Techniques for Improving Service
Productivity - Continued
 Modules

 Modular selection of service.
Modular production

 Automation

 Separating services that lend
themselves to automation
 Precise personnel scheduling
 Clarifying the service options
 Explaining problems

 Scheduling
 Training

 Improving employee flexibility
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More Opportunities to Improve
Service Processes
 Layout
 Human Resources
 Technology

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Production Process &
Technology Alternatives
# Different Products or Parts
High

General Purpose, NC,
CNC
CIM
Flexible
Manufacturing
System

Low

Dedicated
Automation

Low

High
Volume of Products or Parts

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Areas of Technology
 Machine technology
 Automatic identification systems (AIS)
 Process control
 Vision system
 Robot
 Automated storage and retrieval systems (ASRS)
 Flexible manufacturing systems (FMS)
 Computer-integrated manufacturing (CIM)
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Machine Technology
 Increased precision
 Increased productivity
 Increased flexibility
 Decreased pollution
 Decreased size
 Decreased power requirements

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Process Control
 Increased process stability
 Increased process precision
 Real-time provision of information for process
evaluation
 Multi-mode information presentation

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Automatic Identification Systems (AIS)
 Improved data acquisition
 Increased scope of process automation

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Vision Systems
 Particular aid to inspection
 Consistently accurate
 Never bored
 Modest cost
 Superior to individuals performing the same tasks

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Robots
 Perform monotonous, or dangerous tasks, or
those requiring significant strength or endurance
 Enhanced consistency, accuracy, speed strength,
power when substituted for human effort

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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Automated Storage and Retrieval
Systems (ASRS)
 Automated placement and withdrawal of parts and
products
 Particularly useful in inventory and test areas of
manufacturing firms

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Automated Guided Vehicle (AGV)
 Electronically controlled movement of products
and/or individuals

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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Flexible Manufacturing Systems
(FMS)
 Computer controls both the workstation and the
material handling equipment
 Computer control enhance flexibility
 Can economically produce low volume at high
quality
 Reduced costs of changeover and low utilization
 Stringent communication requirement between
components within it
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Computer Integrated Manufacturing
(CIM)
 Extension of flexible manufacturing systems


Backwards to engineering and inventory control
 Forward into warehousing and shipping
 Can also include financial and customer service areas

 Reducing the distinction between lowvolume/high-variety, and high-volume/low-variety
production
 Heavy reliance on information technology
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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Computer Integrated Manufacturing

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Technology in Services
Service Industry

Example

Financial services Debit cards, electronic funds transfer, ATMs, Internet stock
trading
Education
Utilities and
government
Restaurants and
foods

Electronic bulletin boards, on-line journals
Automated one-man garbage trucks, optical mail sorters,
scanners, flood warning systems
Wireless orders from waiters to kitchen, robot butchering,
transponders on cars to track drive-thrus

Communication

Electronic publishing, interactive TV

Hotels
Wholesale/retail
trade

Electronic check-in/check-out, electronic key/lock systems
Point-of-sale terminals, e-commerce, electronic
communication between store and supplier, bar coded data

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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Technology in Services - Continued
Service Industry

Example

Transportation

Automatic toll booths, satellite-directed navigation systems,
route planning, progress monitoring

Health care

On-line patient monitoring, on-line medical information
systems, robotic surgery, expert system diagnosis
assistance
Ticketless travel, scheduling, Internet ticket sales, improved
navigation and route planning

Airlines

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© 2004 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

Process Reengineering
 The fundamental rethinking and radical redesign
of business processes to bring about dramatic
improvements in performance
 Relies on reevaluating the purpose of the process
and questioning both the purpose and the
underlying assumptions
 Requires reexamination of the basic process and
its objectives
 Focuses on activities that cross boundaries
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Showing Sensitivity to the
Environment
 Make products recyclable
 Use recycled materials
 Use less harmful ingredients
 Use light components
 Use less energy
 Use less materials

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Factors Affecting Process
Alternatives
 Production flexibility



These factors
reduce the number
of alternatives!

Product volume
Product variety

 Technology
 Cost
 Human resources
 Quality
 Reliability
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© 1984-1994 T/Maker Co.

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